Stock markets continued to press up against fresh all-time highs headlined by
the S&P500 gaining a foothold above 2500 early this week, pushing the VIX
volatility index back below 10. A weaker US dollar persisted, likely aiding US
equity valuations. On Wednesday, the Fed confirmed that quantitative tightening
is firmly on track to start in October, with rates to continue rising gradually
despite still being perplexed about what has kept the pressure on inflation
readings. Short rates moved up following the FOMC statement but long rates held
relatively stable. By Thursday the spread between the US 5-year and 30-year
treasury yield narrowed to levels not seen since 2007. The Greenback saw a
brief bout of buying before sellers sent the Dollar index back towards 2.5 year
lows. Cable continued to test post-Brexit highs into PM May’s highly
anticipated Brexit speech on Friday. Robust European PMI numbers underscored
the building momentum in many European economies and helped hold the Euro up
near the 1.20 mark despite the perceived hawkishness by the FOMC. The Dow broke
a 9-day winning streak on Thursday and shares trickled lower on Friday after
new sanctions announced at the UN general assembly prompted North Korean to
threaten an above ground nuclear test. For the week, the DJIA gained 0.4%, the
S&P added 0.1%, and the Nasdaq fell 0.3%.

The week’s corporate news was bookended by two significant transactions. Monday
Northrup Grumman confirmed an all-cash deal to acquire Orbital ATK at a $9.2B
valuation including debt. Investors voiced support sending NOC shares up 6% on
the week. After the close of trading in Japan on Friday, Calgon Carbon Corp
announced an agreement to be acquired at a 60% premium by Japan’s Kuraray.
FedEx reported results on Wednesday that were short of expectations and lowered
the full year outlook. Nevertheless shares moved up helped by an announcement
intend to raise shipping rates by ~5% on Jan 1st. Apple shares traded off 4%
this week as a glitch emerged in its new untethered Apple Watch and analysts
predicted iPhone 8 sales may be lackluster as consumers wait for the iPhone X
release in November. The healthcare sector, HMOs and hospitals in particular,
experienced bouts out selling over several sessions when it started to look
like momentum was building for the Republican’s last digit effort to repeal
Obamacare. But on Friday Sen. McCain (R-AZ) indicated he will once again be
break with his party, likely killing the bill’s path forward. The headlines
induced a reversal in some of the healthcare names.